County at Fault for Budget Crisis, Study Says

Extravagant spending by Los Angeles County is responsible for its unprecedented financial crisis, not tax-grabbing politicians in Sacramento, an independent research institute has concluded in a study that raises new questions about why bankruptcy was barely avoided last year.

Like other California counties, Los Angeles is indeed the victim of a state government that has taken away hundreds of millions of property tax dollars in recent years, according to a study to be released today by the Rose Institute of State and Local Government at Claremont McKenna College.

But it has been the county’s own “choices” that threaten to drive it into fiscal insolvency, according to the study. By paying for a bloated administrative bureaucracy, refusing to close hospitals with empty beds and approving enormous salary increases, the county has wasted money that could have been used for such things as opening the still closed “Twin Towers” jail and doubling what is spent on libraries, the study concluded.

“Most of the county’s financial problems are self-inflicted,” said Steven B. Frates, the institute’s senior research associate and lead author of the study. “When you cut to the chase, had they done things differently than they did, L.A. County would have been OK.”

The study was conducted at the behest of the Howard Jarvis Taxpayers Educational Foundation, which wanted an in-depth examination of the county’s spending habits since Proposition 13 was passed in 1978.

While the Rose Institute had been known mostly for analyzing Republican redistricting efforts, it has recently earned a reputation for studying county government operations, including a critical report on Orange County’s Board of Supervisors last year. “They certainly are a reputable group,” said Jane Pisano, dean of the USC School of Public Administration.

The study was based on a five-month review of the county’s own budget documents and financial data.

Among its major findings:

* The largest single factor contributing to the county’s financial turmoil is a “huge increase” in employee salaries and benefits. County employees enjoyed more than a 15% increase since 1990, while L.A. residents as a whole saw their earnings increase by 6%.

Even if the county had granted raises and benefits totaling 10% during that same time period, it would have saved at least $220 million a year.

* Despite a “tremendous excess” of empty beds at both public and private hospitals, the county has not closed facilities or allowed private companies to run them, as many other municipalities have done. County hospitals had a 53.8% vacancy rate last year, meaning 2,025 beds were vacant, the study found. “Even incremental changes in this area could save the county many millions of dollars per year,” the study said.

* The county has allowed some administrative costs to soar. In 1977-78, for instance, officials spent 19 cents for each dollar of welfare aid handed out. By last year, that figure had almost doubled to 34 cents, when taking inflation and population into account. And, the Board of Supervisors spends $40 million a year on its own staff and administrative services, more than twice what it spent 18 years ago.

County officials said Friday that they could not comment in depth since they had not seen the study, but that they plan to contest some findings. For instance, budget analysts said the county spends only eight cents on administrative costs for each welfare dollar handed out. And county Executive Officer Joanne Sturges said the board’s administrative arm spends more now because it has been given vastly increased responsibilities in recent years.

Frates said his team of analysts compared the county’s spending priorities in 1977-78--the year before Proposition 13 was passed and stymied local officials’ taxing authority--with the most recent fiscal year, 1995-96.

The study uses that data to debunk the theory, often floated by the supervisors as a reason for their dire financial situation, that the county is having to do more with less since Proposition 13 was passed.

The researchers found, Frates said, that county spending has actually grown since Proposition 13.

In charts, graphs and analyses, the institute outlines a host of problems it says ultimately caused the county’s $1.2-billion deficit last year. Funding for hospitals and the Sheriff’s Department has far outpaced inflation and population growth, for instance, while funding for libraries, parks, beaches and museums has decreased just as dramatically, the study found.

“This study shows that it is not the fault of taxpayers that L.A. County is in the mess it’s in,” said Joel Fox, president of the Howard Jarvis Taxpayers Assn. “We’re spending less money on libraries, but we’re spending more money overall.” Fox was vice chairman of a county blue-ribbon budget task force that also criticized the county this year for overspending.

The Legislature has added to the county’s burden in a “disturbing trend” of requiring counties to provide certain levels of health, welfare and law enforcement services without giving them more money to do so, the study said. Faced with dwindling funds and increased responsibilities, the county should have downsized or privatized some operations, held the line on increases in salaries and benefits and done more to cut bureaucratic fat, Frates said.

Most of the county’s fiscal problems are the direct result of not making such hard choices, the report concludes. “Given the information in this report, perhaps the Board of Supervisors would have made different choices,” it said. Based on what little county officials knew of the report Friday, they said its findings appear headed for controversy.

For example, the study said the county welfare bureaucracy has exploded, with more than $990 million spent on public assistance administration last year alone.

That figure includes $652 million in administrative costs in the county Department of Public Social Services, $324 million for running the Department of Children and Family Services, and $17 million for the Community and Senior Services Department.

Ann Jankowski, chief of the Budget and Management Services Division in the Department of Public Social Services, said she could not comment since she had not seen the report. But, she said, the department is well run, overwhelmed by huge caseloads and budget cuts, and has to provide far more services than ever before with fewer staffers.

Some also questioned whether the report oversimplifies the complex problem of meeting the health needs of a rapidly changing population.

USC’s Pisano, a member of the county’s short-lived Health Crisis Task Force last year, said that while she could not comment on a report she had not seen, the shortage of hospital beds cannot be solved simply by sending the patients to half-empty private hospitals. Certain hospital wards are meant for patients with specific problems and paid for by specially earmarked government funds, she said.

“You have to look beyond the numbers,” Pisano said. In addition, some counties that have contracted out their hospital services “have found that there are now huge holes in their safety net.”